How To File Taxes as a Partnership (Forms and Deadlines)

Running a business with partners comes with shared responsibilities and shared tax obligations. If you’ve recently formed a partnership or are preparing for your first tax season as one, understanding how partnership taxes work can help you avoid costly mistakes.

Unlike corporations, partnerships do not pay income tax at the entity level. But that does not mean there’s nothing to file. The IRS still requires partnerships to report income, expenses, and other financial activity. And each partner is responsible for paying tax on their share.

This guide breaks down what you need to know about partnership tax filing, including which forms to file, how profits are reported, and key deadlines to track.

📌 Also read: The Pros & Cons of Operating Your Business as a Partnership

What Is a Partnership?

A partnership is one of the simplest ways two or more people can run a business together. It is not a separate taxable entity like a corporation. Instead, a partnership acts as a pass-through entity for federal tax purposes.

Each partner may contribute money, property, or services, and in return, they share in the business’s profits, losses, and responsibilities. This structure offers flexibility in how the business is managed and how income is distributed, but it also comes with specific tax filing requirements.

📌 Also read: What Are The Different Types Of Business Entities?

How Partnerships Are Treated for Tax Purposes

The IRS does not tax partnerships directly. Instead, the income and deductions are passed through to the individual partners.

✅ Informational Return (Form 1065)

The partnership files IRS Form 1065 each year. This form is used to report the partnership’s total income, deductions, gains, and losses. It is not a tax payment form — it’s for reporting only.

✅ Schedule K-1 for Each Partner

Each partner receives a Schedule K-1 from the partnership. This form outlines their share of the partnership’s income, deductions, and other relevant tax items. Partners use this to report their portion on their personal income tax returns.

✅ Pass-Through Taxation

Because the income “passes through” the business to the partners, each partner is taxed individually based on their share. This typically means reporting the income as self-employment income and paying applicable self-employment taxes.

📝 Note: Partnerships do not pay federal income tax at the entity level. However, they are still required to file Form 1065 on time and accurately — failure to do so may result in IRS penalties, even if the partnership owes no tax.

Do Partners Receive a W-2?

No. Partners are not considered employees of the partnership.

No W-2s Issued to Partners

Partners should not be issued Form W-2. Instead, their compensation comes in two forms:

Both types of income are reported on Schedule K-1, not on a W-2.

📝 Note: Since partners do not receive W-2 wages, they are generally responsible for making estimated quarterly tax payments to cover income and self-employment taxes.

Profit Distribution in a Partnership

Partnerships have flexible rules around how profits are split among the partners — but that flexibility must still follow what is outlined in the partnership agreement. This agreement serves as the foundation for how income is shared and whether any of it stays in the business.

Before diving into how taxes work on these profits, it’s important to understand how distribution decisions are made.

How Profits Are Allocated

Each partnership sets its own rules for profit sharing, as long as they follow the terms in the agreement.

✅ Based on the partnership agreement. The partnership agreement outlines what percentage of the profits each partner will receive. These allocations are usually based on each partner’s contribution — whether that’s time, capital, or other resources.

✅ Does not always follow equal ownership. Even if all partners own equal shares of the business, they may not receive equal profit distributions. The agreement may provide for a different allocation, as long as it complies with IRS rules. This includes special allocations allowed under Internal Revenue Code Section 704(b).

✅ Profits may be distributed or reinvested. In some cases, the profits are paid out to the partners. In others, they may be reinvested back into the business to support operations or growth. This decision is also guided by the partnership agreement.

📝 Note: Special allocations must follow IRS rules to be considered valid. Otherwise, the IRS may reallocate income based on ownership percentages, regardless of the agreement.

Are Reinvested Profits Taxed?

Yes. Partners are taxed on their share of the profits, even if the money stays in the business and is not distributed.

Note that:

❌ Keeping profits in the business does not defer tax. Like a sole proprietorship, the IRS treats each partner’s share of the income as taxable for the year it is earned — not when it is actually received.

✅ Income is reported regardless of distribution. Whether a partner takes a distribution or chooses to reinvest it, the income is still considered allocated to them. It must be reported on their individual tax return.

This often surprises new partners who expect to only pay tax on money they actually receive. Partners should prepare for potential tax liabilities even if they plan to leave earnings in the business.

How to File Taxes as a Partnership

Filing partnership taxes involves a few structured steps. Partnerships are pass-through entities, meaning they report business activity but do not pay federal income tax directly. Each partner reports their share of income, deductions, and credits on their individual tax returns.

The process begins with obtaining an identification number and ends with filing required IRS forms and paying estimated taxes.

Step 1 – Obtain an Employer Identification Number (EIN)

Every partnership must have an Employer Identification Number (EIN) from the IRS. This number identifies the partnership for federal tax purposes and is required when filing the annual return.

✅ Why it matters

Partnerships are not allowed to use a partner’s Social Security Number for business filings. The EIN serves as the business’s official tax ID.

✅ How to apply

You can apply online through the IRS website. Once approved, the EIN is issued immediately.

📝 Note: The IRS online EIN application is only available during business hours and may be unavailable during scheduled maintenance periods.

Step 2 – File the Partnership Return (Form 1065)

Each year, the partnership must file Form 1065 (U.S. Return of Partnership Income). This form reports the partnership’s income, deductions, credits, and other relevant financial details for the tax year.

✅ Filing deadline

Form 1065 is due by March 15, or the 15th day of the third month after the end of the partnership’s tax year.

✅ Extension

If the partnership requests an extension, the filing deadline is generally extended to September 15.

📝 Note: Even though the partnership does not pay federal income tax, filing Form 1065 is still mandatory. The form is considered an information return that summarizes the business’s financial activity.

Step 3 – Distribute Schedule K‑1 to Each Partner

Once Form 1065 is completed, the partnership must prepare and issue a Schedule K‑1 to every partner. This form details each partner’s share of income, deductions, and credits.

✅ Purpose of Schedule K‑1

Partners use the information on their Schedule K‑1 to report their portion of the partnership’s activity on their individual income tax returns.

✅ Timing

Partners should receive their Schedule K‑1 early enough to complete their personal returns accurately and on time.

If a partner does not receive their K‑1 promptly, they should follow up with the partnership before filing their return to avoid errors or incomplete reporting.

Step 4 – Pay Self‑Employment Taxes

Partners are typically considered self‑employed and are responsible for paying Social Security and Medicare taxes on their earnings.

The self‑employment tax rate for 2025 is 15.3% total:

Partners calculate these taxes using Schedule SE when filing their personal tax returns.

📝 Note: Because partnerships are pass‑through entities, the IRS expects partners to handle their own employment taxes through self‑employment reporting.

Step 5 – Prepare and Pay Estimated Taxes

Since partnerships do not withhold taxes for partners, each partner is responsible for making quarterly estimated tax payments. These payments cover both income tax and self‑employment tax owed on the partner’s share of business earnings.

✅ How it works

Partners generally use Form 1040‑ES to make estimated tax payments throughout the year. These payments help avoid underpayment penalties when filing annual returns.

It’s often helpful for partners to review their quarterly income and adjust their estimated payments as needed to stay current with IRS requirements.

When Are Taxes Due for Partnerships?

Partnership tax filing follows a slightly earlier timeline than individual tax returns. Even though the partnership itself generally does not pay federal income tax, it must still submit Form 1065 and provide each partner with a Schedule K‑1.

For most calendar-year partnerships, the annual filing deadline is March 15.

Key Deadlines and Filing Requirements

✅ March 15 – Form 1065 Deadline

Partnerships must file Form 1065 by March 15, which is one month before the standard April 15 deadline for individual tax returns. This applies to partnerships operating on a calendar year.

✅ Form 7004 – Extension Request

To request more time, partnerships must file Form 7004 by March 15. This provides a six-month extension, moving the filing deadline to September 15.

📝 Note: The extension only gives more time to file Form 1065. It does not extend the deadline for individual partners to pay taxes owed on their share of partnership income.

✅ K‑1 Distribution

Even if the partnership files for an extension, each partner is still expected to report their share of income based on a timely K‑1. Delays in issuing K‑1s may affect a partner’s ability to file on time.

📌 Also read: When Are Taxes Due? Important Deadlines for the 2024 & 2025 Tax Years

Key Takeaways

Partnerships do not pay federal income tax directly. Instead, they file Form 1065 to report business activity and issue Schedule K‑1 to each partner.

The standard filing deadline is March 15, with the option to request a six‑month extension using Form 7004. Partners must still report their share of income on their individual tax returns and may owe self‑employment tax on those earnings.

Reviewing the partnership agreement, keeping accurate records, and consulting a qualified tax professional can help ensure compliance and avoid filing errors.

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